president Lula

For nearly seven years, he’s done a spectacular job as Brazil’s president. But can Lula resist the temptation to throw it away?

He grew up so poor, he didn’t find out what bread was until he was 7. That was Lula’s age when he climbed onto a flatbed truck with his Brazilian dirt-farmer family and all their possessions and made the 1,900-mile journey from the country’s northeastern dustbowl for a life in the slums of São Paulo. He dropped out of school in the fifth grade, shined shoes on the street, and went to work in a factory at 14, losing a finger to a lathe in an accident on the graveyard shift at an auto-parts plant. Eventually he rose through the rank and file to become an internationally respected union leader. A military junta ruled Brazil back then, and strikes were illegal, but he defied the generals and the bosses and practically shut down the continent’s industrial powerhouse in the name of the steelworkers.

He’s in New York this week to kick off the 64th session of the United Nations General Assembly. The cameras may focus on the embodiment of American cool, Barack Obama, or on flamboyant autocrats and chest thumpers like Iran’s Mahmoud Ahmadinejad and Venezuela’s Hugo Chávez, but the biggest star on hand will be the blunt, bearded onetime lathe operator: Brazil’s president, Luiz Inácio Lula da Silva. After nearly seven tumultuous years in office, the man everyone calls Lula continues to enjoy an approval rating above 70 percent. That would be a remarkable feat anywhere, never mind in a continent where presidents are a disposable commodity. “That’s my man right there,” Obama greeted him at this year’s Summit of the Americas. “The most popular politician on earth.”

How da Silva earned such acclaim says plenty about how wealth and power are shifting in this postcrash age. With his leadership, Brazil has withstood the global crisis better than almost any other nation: not a single bank went under, inflation is low, and the economy is growing again. “People doubted it when I said we would be the last to fall into recession and the first out,” Lula told NEWSWEEK in an exclusive interview. “But just wait and see, this December. We are going to create a million jobs this year.” That’s not as good as it may sound: a million jobs would only just about replace the jobs his country has lost since October 2008. But Brazil is looking pretty good compared with most places; it’s outpacing Russia and joining India and China—the other big emerging powers tagged collectively BRICs—to lead the way back to global economic growth. Gone are the days when, as Goldman Sachs chief economist Jim O’Neill jokingly recalls, “people told me I put the B in BRICs to make the acronym sound better.”

Brazil’s man of the moment says he couldn’t give a fig for the polls. “If you have flawed policies and try to sell them with false publicity, your ratings won’t last,” he says. But the question now is whether he can continue to parlay his own star power into gains for Brazil—and, more pointedly, whether he is about to throw away much of what he has accomplished as president. He has just 15 months to go in office, and his favored successor, chief of staff Dilma Rousseff, has little national name recognition and none of her boss’s charm. Despite his overwhelming popularity, recent polls say she’s running a distant second and losing ground to the opposition’s choice, São Paulo Gov. José Serra. “Lula’s aura is not transferable,” remarks Donna Hrinak, a former U.S. ambassador to Brazil. To compensate, the former labor firebrand has begun doing just what his critics feared when he first took office in 2003: tightening government control of the economy, looking the other way when key allies are caught with their hands in the public till, and spraying money about with abandon.

In the name of helping poor and working-class Brazilians—but with a close eye on next year’s election—da Silva has repeatedly pumped up the minimum wage (up 67 percent since 2003, nearly 40 percent over the pace of inflation) and is boosting government pay and pensions, a move that can only add to the next administration’s troubles. “We have to give a little more to those who earn less,” Lula says. Yet that’s the sort of populist talk that gives many the chills. “The risk is the legacy of fixed expenditures and budget commitments that Lula will leave for the future,” warns former finance minister Mailson da Nóbrega. The public payroll is growing at more than 10 times the rate of public investment in roads, bridges, and ports. Meanwhile, da Silva has done nothing to ease the country’s total tax burden, the highest in the emerging markets at 36 percent of GDP. And when Senate leader and former president José Sarney, who controls a key block of votes in the allied Brazilian Democratic Movement Party, came under fire for handing out jobs to cronies and kin, Lula rushed to his defense, saying Sarney “could not be treated like an ordinary person”—an odd choice of words, coming from a man of the people.

Still, if there’s one constant truth about Lula, it is that things are subject to change. “I am a walking metamorphosis,” he likes to say, quoting the 1970s Brazilian cult singer Raul Seixas. On the surface, he bears no more than a faint resemblance to the roughcut union man of 30 years ago, or even to the politician he became in the ’80s and ’90s, stumping for the poor and forgotten till he went hoarse. The once black curls and unkempt beard are neatly trimmed now and shot through with gray. In place of his old stained workshirt and denim bell-bottoms, he dresses in smart suits tailored to flatter his barrel of a body. His lifelong lisp has lessened, and long hours of practice have refined his shop-floor grammar and vocabulary. The man who took office saying he would be content to improve the lot of the Brazilian poor is now convinced of Brazil’s mission to transform the world. “Brazil is a country with solid, democratic institutions,” he says. “We have shown nations some lessons about how to confront the economic crisis.”

And yet in deeper ways he’s the same as ever. He still speaks in the sandpaper basso profundo that electrified his fellow metalworkers. And for all his polished manners and fine clothes, nothing vexes Lula more than being trapped in his office. “He gets nervous when he spends too much time at his desk,” says his cabinet chief, Gilberto Carvalho. “He says, ‘I need to get out and travel, and meet people.’ His connection is with the little guy.” The president likes nothing more than to ditch protocol, go off script, and (to the despair of his security detail) wade into an adoring crowd. Nevertheless, to his credit, he has resisted his followers’ urgings to amend the Constitution so he can seek a third term and warns against the false high of celebrity. “Popularity is like blood pressure,” he says. “Sometimes it’s high and sometimes it’s low. What you need is to keep it under control.”

That’s a skill he acquired the hard way. Starting in 1989, he ran for president three times, surging in early polls only to hit a wall on voting day. By the late ’90s he was on the verge of quitting politics. Instead, he did something bolder: he remade himself. He stopped his fist-waving harangues, climbed into a suit, and hired a speech coach and a marketing wizard. More important, he tempered his leftist politics. The turning point was June 2002. He was ahead in the polls, but Brazil’s economy was tanking—largely, it seemed, because investors were spooked by the prospect of President Lula. He responded with a “Letter to the Brazilian People,” pledging to honor contracts, pay down the country’s debts, abide by the International Monetary Fund’s requirements, and generally play by the rules of the market. It was the gamble of his career, the political equivalent of tacking into a hurricane. Hardliners from his Workers Party (PT) accused him of betraying and caving in to bankers and capitalist carpetbaggers. Business executives were also wary: could the “new” Lula be trusted? Investors sat on their hands.

He won by a landslide, but the hard work had only begun. The pre-election financial turmoil had gutted economic growth and forced a steep devaluation of Brazil’s currency. “It wasn’t easy,” recalls Lula. “We had no foreign credit. Our [hard currency] reserves were extremely low. Inflation was showing strong signs of resurgence. The economy was gridlocked.” But an even bigger challenge was to live down the hard-left image he and the ruling PT had acquired over the years. “We took office amid a huge crisis of mistrust,” says Carvalho, his cabinet chief and a longtime friend. “We were a minority in Congress. The press was skeptical.” After all, Carvalho allows, “Until then everything we’d stood for was not paying the foreign debt, raising salaries. It would have been a disaster.”